For all the SS PRivitization Haters

[CCass]

I heard this little math problem today.

Assume a person begins work at 20, and works until they are 70. They make $7 an hour for the enitre 50 years of work.

$7 X 2080 = $14,560 a year
$14,560 X 4% = $582.40 annually or $48.50 per month

$48.50 per month at 11% interest (what the Federal Thrift Savings Plan - Option C has averaged over its lifetime) for 50 years = $1,100,000

[natedogg]

Where the hell are you getting 11% interest? That's a great stat. Based on fantasy.

There's PLENTY of good reason to support privatization without resorting to outright deception.

Nobody, ever, is going to realize an 11% return for their entire life.

natedogg

[natedogg]

Here's a better stat. All totals used are the estimates provided by SSA.gov's benefit's calculator:

If you are age 30, and you made $20K in 2005, here is your
Social Security scenario:


Lifetime Earnings = $832,400
Lifetime FICA = $103,218
Benefit = $10,752/yr
Age at which he breaks even: 76.5

So... if you earn a measly 20k a year for life, clearly one of the working poor who live hand to mouth, you have to live ABOVE the average just to break even. Once you turn 76.5 you'll start moving into the black ....

And that's for the type of person it is supposedly designed to help. What a wonderful program.

If I only calculate the FICA used for retirement the numbers aren't so bad. It's

Lifetime FICA (retirment portion only): 88, 234

Age to break even: 75 1/4

Wow, so much better

natedogg

[CCass]

[ QUOTE ]
Where the hell are you getting 11% interest? That's a great stat. Based on fantasy.

There's PLENTY of good reason to support privatization without resorting to outright deception.

Nobody, ever, is going to realize an 11% return for their entire life.

natedogg

[/ QUOTE ]

Nate,

I told you where I got the 11% figure. The C-Plan of the Federal Thrift Savings Plan has averaged 11% over its entire life (better than 10 years). I think 11% is a perfectly reasonable number to use.

[WillMagic]

[ QUOTE ]
[ QUOTE ]
Where the hell are you getting 11% interest? That's a great stat. Based on fantasy.

There's PLENTY of good reason to support privatization without resorting to outright deception.

Nobody, ever, is going to realize an 11% return for their entire life.

natedogg

[/ QUOTE ]

Nate,

I told you where I got the 11% figure. The C-Plan of the Federal Thrift Savings Plan has averaged 11% over its entire life (better than 10 years). I think 11% is a perfectly reasonable number to use.

[/ QUOTE ]

Oh, CCass, you so silly.

Say I take 10 2+2rs of similar ability, and have them each play 10,000 hands. They each post winrates between -.5BB/hr and 4BB/hr, with a good distribution in between.

How do you think we should predict what the likely average winrate for all these players will be in the future?

1) Average all the winrates
2) Pick the highest winrate of all ten players and assume everyone will do that well.

Let me give you a hint. What you are doing is equivalent to option 2.

Will

[zaxx19]

The C-Plan of the Federal Thrift Savings Plan has averaged 11% over its entire life (better than 10 years). I think 11% is a perfectly reasonable number to use.

It has....goodbye Kaplan funds hello Federal thrifts!!!

Seriously no it is not reasonable to assume 11% returns are sustainable...7.5% would be about the max.

[adios]

Don't know what the C-Fund is but the stock market as measured by the S&P since 1926 has returned not too far from 11%. Gernerally speaking a lot of folks use an equity risk premium of 5.5% which is the premium the stock market has returned above long term bonds ex post. The 30 year treasury is at close to 4.5% so if one believes that the ex ante risk premium paid by the stock market will be 5.5% that would put the return on stocks for a 30 year holding period of 10% per year (arithmetic average). The administration is stating that the equivalent long term investment return equivalent to what Social Security will pay is between 5% and 6% per year if you believe inflation will range between 2% and 3% which is where the Fed's targets are for inflation are. So in my mind 11% is justifiable. Personally I don't believe the ex ante equity risk premium will be as great as 5.5%.

[CCass]

C-Fund is an S&P 500 index fund.

[CCass]

Maybe you should learn about Mutual Funds. There are many M-Funds that have a lifetime average of 10+%.

I am not the one that is being silly.

10,000 is a small sample size. How about M-Funds that have been around for 40 or 50 years?